Recent Litigation Reminds Employers to Review Background Check Forms

As most employers are aware by now, many federal government agencies are scrutinizing background check practices on job applicants and employees. As FMG reported in its July 2014 issue of LawLine, the EEOC and the Federal Trade Commission have issued publications on the proper use of background checks in employment (https://www.fmglaw.com/article.php?id=340).

Employers who do utilize background checks have another hurdle to face: ensuring the forms they provide to applicants and employees in connection with the checks comply with the Fair Credit Reporting Act (“FCRA”). Although the FCRA’s requirements regarding forms are not new, some federal courts recently have interpreted these requirements in a narrow way that may expose many employers to liability.

Under the FCRA, before an employer may conduct a lawful background check on an applicant or employee by obtaining a “consumer report” (which includes motor vehicle records, criminal background checks, and credit history reports, among others), it must: 1) make a clear and conspicuous disclosure in writing to the individual in a document that consists solely of the disclosure that a consumer report may be obtained for employment purposes; and 2) obtain written authorization from the individual for the employer to obtain the report (this authorization may be included on the same form as the disclosure). The statute provides for penalties of $100 to $1,000 for each willful violation as well as punitive damages, litigation costs, and attorney’s fees. Monetary penalties also are available for mere negligent violations.

There has been a recent emphasis on the phrase “in a document that consists solely of the disclosure” in an effort to determine what, if any, other information (aside from the authorization) may be included on the disclosure form. The purposes of this requirement are to place applicants and employees on clear notice that they may be subjected to a background check and to avoid employers burying the disclosure in another document, such as a job application. In particular, plaintiffs have argued, and been successful, in several high-profile lawsuits that employers should not be permitted to include on the disclosure form a provision releasing the employer from liability for any decisions made based on information obtained through the consumer report.

In December 2013, a federal district court in Pennsylvania, in a class action brought by job applicants, ruled that Closetmaid violated the FCRA by including in its disclosure and consent form a waiver of rights provision. This summer, well-known supermarket chain Publix entered into a $6.8 million settlement in another class action by job applicants alleging violation of the FCRA by including on its employment application a liability release regarding consumer reports.

Although not all federal courts have adopted this narrow interpretation, employers would be wise to avoid risk (and the possible imposition of monetary fines, which could increase exponentially in a class action) and review their FCRA background check disclosure forms to ensure they do not contain any waiver or release of liability provisions. As always, the Labor and Employment Law attorneys at FMG are available to assist in this review and in ensuring that employers’ background check practices are consistent with applicable laws.